Short-Term Texas Commercial Electricity Contracts Now Cost 57% More Than Long-Term Rates

The Texas commercial electricity market is running a pricing inversion in July 2026. In the texascommercialplans.com catalog, short-term commercial plans (12 months or shorter) are median-priced at $0.130 per kWh, while long-term plans (36 months or longer) sit at $0.080 per kWh. That is a 62.5 percent premium on the short end. When this analysis was scoped against the June 23 scrape, the gap was 57 percent, so the inversion is widening, not stabilizing.

Key takeaways

• In the July 2026 catalog scrape, the short-versus-long-term commercial electricity price gap in Texas increased to 62.5 percent, up from 57 percent on June 23, with short-term plans at a median $0.130 per kWh and long-term plans at $0.080.
• The distortion is a supply problem rather than a long-contract rate cut. Of the 531 active commercial plans across the five ERCOT-region TDU territories, 396 are short-term (12 months or shorter) and only 51 are long-term (36 months or longer). Mid-term plans (13 to 35 months) add another 53.
• Long-term rates are structurally low because they were originated against 2024 to 2025 forward strips. Per the EIA March 2026 modeling, the ERCOT North hub wholesale price could run 78.9 percent above the STEO forecast of $47.39 per MWh, which makes the current long-term discount a narrowing window.
• ERCOT's April 2026 Long-Term Load Forecast projects a 50 percent demand increase by 2029, and EIA attributes as much as 15 percent of near-term load growth to data centers between 2025 and 2027. Both signals push the risk case toward locking longer now.
• For a commercial buyer choosing today, the deciding question is not "long or short" in the abstract. It is where a 12-month renewal lands. A 12-month contract signed in July 2026 renews into the 2027 window, where forward strips already price a 5 percent monthly acceleration.

What is the current price gap between short-term and long-term commercial electricity contracts in Texas?

In the July 2026 catalog scrape, short-term commercial electricity plans in Texas were priced at a median of $0.130 per kWh. Long-term plans (36 months or longer) sold at a median of $0.080 per kWh. That is a 62.5 percent premium on the short-term band, wider than the 57 percent gap recorded on June 23 and the widest short-versus-long-term spread the tracking window has recorded.

The mid-term band (13 to 35 months, effectively the 24-month contract cohort) came in at a median of $0.079 per kWh, roughly in line with the long-term band. That means the pricing barrier in the 2026 Texas commercial market is not 24-month versus 36-month. It is anything shorter than 12 months against anything 24 months or longer.

Rate spreads at the tails are wider still. The lowest-priced long-term contract in the catalog is $0.06338 per kWh. The highest-priced short-term contract is $0.211 per kWh. Both are real, PUCT-registered offers from active retail electric providers, and both are available to Texas commercial buyers today.

Texas commercial electricity rates by contract length (July 2026)

Contract band	Term range	Plans in catalog	Median rate	Range (min to max)	Date
Short-term	1 to 12 months	396	$0.130 per kWh	$0.04417 to $0.211	2026-07-10
Mid-term	13 to 35 months	53	$0.079 per kWh	$0.0641 to $0.14087	2026-07-10
Long-term	36 months or longer	51	$0.080 per kWh	$0.06338 to $0.119	2026-07-10
All commercial	Any	531	$0.11245 per kWh	$0.04417 to $0.211	2026-07-10

Source: texascommercialplans.com catalog scrape, July 2026. Coverage: all five ERCOT-region TDU territories (Oncor, CenterPoint, AEP-Texas Central, AEP-Texas North, TNMP). Aggregate values; per-REP rates are not shown.

Why are short-term rates 62 percent higher than long-term rates in 2026?

The short-term premium in the Texas commercial catalog is a supply-and-origination distortion, not a market signal that short contracts are inherently more expensive. Three forces stack:

Concentrated supply on the short end. Of the 531 active commercial plans tracked in July 2026, 396 (74.6 percent) are short-term. Only 51 (9.6 percent) are long-term. Concentrated supply on the short end means retail electric providers pricing new short-term products against summer 2026 volatility have no incentive to underprice each other. Concentrated demand on the long end, against a thin supply, would normally push long rates up. Instead, the long rates are held down by the second force.

Origination vintage. Most of the 51 long-term plans in the catalog originated in 2024 or 2025, priced against forward strips that had not yet absorbed the ERCOT summer 2026 load forecast or the EIA March 2026 STEO revision. In other words, the long-term rates are cheap because they are old. New long-term originations at current forward strips will not remain at $0.080. Constellation's June 2026 commercial energy market update flagged 2027 through 2030 forward strip prices as rising roughly 5 percent per month and 1 percent per week.

Demand-side risk premium on short-term. Retail electric providers pricing new 12-month product in July 2026 have to price in the risk that ERCOT summer 2026 peak demand hits 95 GW (up from 83.9 GW in 2025) and drags real-time settlement points with it. That risk is built into the $0.130 short-term median. Buyers looking at a $0.080 long-term quote against a $0.130 12-month quote are seeing two different vintages, not two different products.

What contract lengths do Texas REPs actually offer for commercial electricity?

In the deregulated market for commercial electricity in Texas, contract terms fall into four practical buckets:

• Short-term (1 to 12 months). The 396-plan dominant cohort. Most common lengths: 3, 6, and 12 months. Used for interim coverage between long contracts, for buyers with unstable load, or when a buyer expects rates to fall.
• Mid-term (13 to 35 months). Effectively the 24-month band. 53 plans in the July catalog. Often the sweet spot: pricing near long-term parity, renewal window still flexible.
• Long-term (36 months or longer). 51 plans. 36 months is the practical maximum for most REPs. A handful of providers offer 48 or 60 months, but liquidity is thin.
• Non-standard (8, 14, 18, or 30 months). Not visible as a separate cohort in the aggregate catalog because REPs price them on request. These exist specifically to shift the renewal window off summer peak or off a scheduled TDU rate adjustment.

The Public Utility Commission of Texas (PUCT) does not cap commercial contract length. It does monitor early-termination fees and requires each contract's terms of service to disclose the fee schedule, so the theoretical ceiling is set by REP appetite, not regulation.

The TxCP Term Selector framework: choosing a commercial electricity contract length in 2026

Term selection is usually reduced to "long for stability, short for flexibility." That framing is not useful in a market where the long-term rate is 62 percent cheaper than the short-term rate. The Term Selector filters the decision through four questions in order:

1. Load stability. Is the site's monthly kWh usage predictable within roughly 15 percent month over month? If yes, proceed to question 2. If no (highly variable load, new site, pending expansion), stay short and revisit in 6 months. A fixed long-term contract can create swing charges and pass-through liabilities when actual usage diverges from the contract band.

2. ERCOT renewal window. Model where the contract renews. A 12-month contract signed in July 2026 renews in July 2027, into the peak of the ERCOT 2027-2029 grid-stress window. A 24-month contract shifts renewal to July 2028, still inside that stress window. A 36-month contract shifts renewal to July 2029, at the outside edge. This is the most under-weighted factor in most buyer decisions.

3. Renewal season. Historical seasonal renewal analysis suggests summer and fall renewals run 15 to 25 percent more expensive than winter or spring shoulder renewals. If the natural renewal date lands in summer, consider a non-standard 14, 18, or 30 month term to shift the next window to fall or spring.

4. Exit optionality. What does the contract's early-termination fee actually cost, and does the buyer have a scenario where they would exit early (sale of the business, closure, relocation)? Longer contracts carry larger exit exposure. If the buyer will not accept exit risk, the term should not exceed the buyer's planning horizon.

The framework routes most stable-load commercial buyers to a 24 or 36 month contract in the current market, but the routing is deliberate rather than reflexive.

Should a Texas business lock in a 24 or 36 month contract in 2026?

For a stable-load commercial buyer choosing between 24 and 36 months in July 2026, three factors settle the question:

• Rate parity. The 24-month and 36-month medians in the catalog are $0.079 and $0.080 per kWh. There is no material rate penalty for the longer term.
• Forward strip trajectory. Per Constellation's commercial market update, the 2027 to 2030 forward strips have been rising roughly 5 percent per month in 2026. A 36-month contract signed at $0.080 today is a hedge against renewing at a forward-strip-implied rate in 2028.
• Renewal window. A 24-month contract signed in July 2026 renews in July 2028, inside the 2027-2029 grid-stress window. A 36-month contract renews in July 2029, at the tail of that window. The 36-month term buys 12 additional months of pricing certainty during the period most exposed to data-center load growth.

The Term Selector framework routes stable-load buyers with predictable planning horizons to 36 months in this market. Buyers with a sale, closure, or relocation scenario in the 24-to-36 month window route to 24 months instead. For a matching aggregate market view, see the Texas commercial electricity market report for July 20, 2026.

What are the risks of a 3-year commercial electricity contract in Texas?

Long-term commercial electricity contracts in Texas carry three concrete risks a buyer should model before signing:

Pass-through charges. Fixed-rate commercial contracts in Texas typically fix the energy portion of the bill but pass through TDU delivery charges, TDU rate rider changes, and ERCOT ancillary service uplifts. A 36-month contract does not fix these. Oncor, CenterPoint, AEP-Texas Central, AEP-Texas North, and TNMP have all filed TDU rate cases within the last 24 months, and pass-through exposure over a 36-month window is material.

Early-termination fees. A 36-month contract's early-termination fee (ETF) is typically calculated as a per-kWh liquidated damages figure or the remaining contract value marked to market. PUCT commercial rules require disclosure but do not cap the amount. A buyer that expects to sell, close, or relocate the site inside 36 months should model the ETF against the rate savings before signing.

Load band violations. Most fixed-rate commercial contracts fix the rate for usage within a defined band (often 80 to 120 percent of contracted usage). Consumption above or below the band is billed at index-linked rates that can be materially higher than the contract rate. Businesses adding load (new equipment, expansion, EV charging) or shedding load (efficiency projects, closures) can breach the band and lose the price certainty they paid for.

None of these risks argue against a 36-month term for a stable buyer. They argue for reading the terms of service, not just the headline rate.

What are the risks of a 12-month commercial electricity contract in Texas?

Short-term commercial contracts carry a different risk stack:

• Renewal exposure. A 12-month contract signed in July 2026 will renew in July 2027, into a forward-strip environment that market updates expect to run 5 percent higher month over month. The July 2027 renewal rate is likely to land materially above the current $0.130 short-term median, not below it.
• Summer origination penalty. Short-term contracts originated during summer months carry a demand premium that is not present in fall or spring originations. A 12-month contract signed in July 2026 pays that premium once and then renews into the same premium in July 2027.
• Cash-flow uncertainty. For businesses on tight commercial budgets, annual renewal introduces a rate-line uncertainty that longer contracts eliminate.

Short-term contracts are the right choice for buyers with unstable load, pending relocation, or a firm view that Texas commercial rates will fall in 2027. They are the wrong default for stable buyers in the current market. Recent coverage of the same signal: Utility Dive on the 79% ERCOT price hike scenario.

When is the best time to sign a long-term Texas commercial electricity contract?

Long-term commercial contracts price against forward strips, which move on a delayed schedule relative to spot rates. Two windows are historically favorable:

• Late fall (October and November). Forward strips for the following summer are typically priced in by early fall. Signing between the ERCOT summer close-out and the year-end reset window has historically produced 3 to 7 percent better long-term rates than summer signings.
• Early spring (February and March). After the ERCOT winter risk window closes and before the summer forward-strip build begins, the mid- and long-term catalogs briefly reprice down.

Buyers using the Term Selector framework in July 2026 face a specific counterargument to waiting. The current 62 percent short-versus-long-term spread is a supply-vintage anomaly, not a seasonal one. Waiting for the fall window means the long-term catalog will reprice against 2026 forward strips, likely eroding the current $0.080 median. Signing now captures the vintage discount at the cost of the seasonal one.

Non-standard contract lengths (14, 18, 30, or 42 months) are the useful lever here. They let a buyer shift the next renewal off summer without waiting to sign, which is often the highest-value move.

What is PUCT's rule on early termination fees for commercial electricity contracts?

The Public Utility Commission of Texas regulates early-termination fees for residential contracts under 16 Texas Administrative Code Section 25.475, but the commercial market is more lightly regulated. PUCT rules require:

• The retail electric provider's Terms of Service (TOS) must disclose the ETF calculation method.
• The ETF must be a good-faith estimate of the REP's actual damages, typically calculated as the remaining contract kWh times a mark-to-market rate delta.
• The REP cannot charge an ETF for a customer moving out of the REP's service territory (the "move-out" exception), though the customer typically must show proof of move.

There is no PUCT cap on the commercial ETF amount. Contract-level ETFs of $0.02 to $0.05 per unused kWh are common. On a 36-month contract with 250,000 annual kWh, an ETF of $0.03 per kWh on 500,000 unused kWh totals $15,000. Buyers should evaluate this figure against their exit-risk scenario before signing any long-term contract.

Frequently Asked Questions

How long is the average commercial electricity contract in Texas?

In the Texas deregulated market, the most common commercial electricity contract lengths are 12, 24, and 36 months. The July 2026 catalog shows 396 short-term plans (12 months or shorter), 53 mid-term plans (13 to 35 months), and 51 long-term plans (36 months or longer). Contract lengths of 48 or 60 months exist but are uncommon.

Are 5-year commercial electricity contracts available in Texas?

Yes, but they are thinly supplied. Only a handful of REPs offer 48- or 60-month terms in the current catalog, and most require a broker relationship or a load size above roughly 500,000 annual kWh. For most small and mid-size commercial buyers, 36 months is the practical maximum.

Can a Texas business break a long-term electricity contract?

Yes, but the contract's early-termination fee applies. Commercial ETFs are typically calculated as a mark-to-market damages figure and are not capped by PUCT. A business planning a possible sale, closure, or relocation should model the ETF before signing a 24- or 36-month contract.

Why are short-term Texas commercial electricity rates so high in 2026?

The July 2026 short-term commercial median of $0.130 per kWh reflects three forces: 74.6 percent of the active commercial catalog is short-term (concentrated supply, no incentive to underprice), summer origination carries a demand premium, and REPs price new short-term product against ERCOT summer 2026 volatility risk. Long-term rates at $0.080 are lower because most were originated in 2024 or 2025 against then-lower forward strips.

Should I sign an odd-length electricity contract like 18 or 30 months?

Non-standard contract lengths are the primary tool for shifting a renewal window off summer peak. If a natural renewal date lands in July or August, a 14, 18, or 30 month term can move the next renewal to fall or spring, historically 15 to 25 percent cheaper. Most REPs quote non-standard lengths on request rather than publishing them.

What is a good rate for a commercial electricity contract in Texas right now?

As of the July 2026 catalog scrape, the market-wide median commercial rate across the five TDU territories is $0.11245 per kWh. For a 24- to 36-month contract, rates below $0.09 per kWh are competitive. For a 12-month contract, rates below $0.11 per kWh are competitive. Both figures assume a standard commercial load with predictable usage within a 15 percent monthly band.